I am more of a type A trader, however I use B extensively. With edge so tight in the options I trade it essential for me to use intraday skills to leg into positions for positve theoretical edge. Most of my options positions have been long vol over the last 4 months, thus it is neccessary to counter the inevitable decay I will experience. Contrary to Hello's recent experience, this has worked well for me although it is typically leaned one way(biased intentionally or for sound position management). For some reason, I feel my directional trading is better using theoretical deltas as opposed to stock. One reason is mentioned above, I only leg into positions for prices that I like. Another is that with options, I can limit my directional risk which is better in line with my risk profile. Of course, this introduces other elements, but Gabi's original question presumes an ability to manage these. It so happens I think that this is my strength with a semblence of skill to pick direction.
Optionetics Alternatives...
- Thread starter canyonman00
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But the question is, will this "step by step trading guide" actually make you any money? Highly unlikely, don't you think? When you consider that you're going against career professionals who probably, on average, have 157 times more knowledge than is contained in your "guide"?
And, realistically, if you're the kind of person who requires "step by step" guidance (and are willing to fork out $3000 for it), then not only are you not cut out for trading options, you're probably not cut out for trading of any sort.
I have a bit of problem with this blanket type of statement towards learning. There are many grade schools, high schools and colleges across this country that fit into that pocket too neatly you see. Large and small. Liberal Arts focused and otherwise.
At some point we all have followed that mold for something. Wharton (and the like) charges a handsome fee for its executive training/handholding programs too you know. Either this concept is universal, or ignorable.
Quote from canyonman00:
Wharton (and the like) charges a handsome fee for its executive training/handholding programs too you know. Either this concept is universal, or ignorable.
Now you're starting to catch on!
(Personal opinion: the value of the Whartons, Chicagos and Harvards isn't so much in the 'calibre' of their teaching staff, or their 'committment to academic excellence' -- although they like you to believe it -- as it is in the prestige, developing contacts and pitting yourself 'against the best'.)
Quote from alfonso:
Now you're starting to catch on!
(Personal opinion: the value of the Whartons, Chicagos and Harvards isn't so much in the 'calibre' of their teaching staff, or their 'committment to academic excellence' -- although they like you to believe it -- as it is in the prestige, developing contacts and pitting yourself 'against the best'.)
Agree. Any bright person having large experience with Ivy League colleges graduates can notice that.
I wounder if it is really possible to figure out a vega neutral but short/long theta strategy. For example, a long calendar could initially be vega neutral, but it probably would not say vega neutral forever
Well, if you do belive that volatility is mean reverting, the statistical edge is there - look for say, 2 sigma peaks or valley in volatility and long/short vol respectively. Or, even better, look for overbought/oversold skew. But there is plenty of little things to worry about, I agree.
As for the original question (scalper vs positional trader) - I would say neither and go with an exchange local
sle,
Actually, a long calendar spread is a vega positive position, while a short calendar is vega negative. But there are other ways to neutralize vega and just play theta. One way that comes to mind is to ratio and diagonalize both a call and a put calendar spread by selling more near term closer to the money options than the longer term OTM options you buy as a hedge.
However, the problem with that position, in addition to the unlimited risk aspect, is that it will become vega pos (or neg) pretty quickly simply due to the passage of time. Thus, to maintain vega neutrality, you'll be forced to make frequent adjustments to the position, which can get costly.
But I agree that a strategy that, as you suggested, goes long vol when it's low and short vol when it's high makes a lot of sense. The problem there of course, as with any "directional" strategy, lies in being able to accurately pinpoint overbought/oversold levels. That can be tough to do as we've seen the last several months when going long vol wouldn't have worked even though on paper it would have been the "right" play.
Thus, my personal preference is to just play the ranges, sell theta and live with the long vega and gamma exposure, understanding full well that vol will go up sooner or later.
Regards,
HD
Actually, a long calendar spread is a vega positive position, while a short calendar is vega negative. But there are other ways to neutralize vega and just play theta. One way that comes to mind is to ratio and diagonalize both a call and a put calendar spread by selling more near term closer to the money options than the longer term OTM options you buy as a hedge.
However, the problem with that position, in addition to the unlimited risk aspect, is that it will become vega pos (or neg) pretty quickly simply due to the passage of time. Thus, to maintain vega neutrality, you'll be forced to make frequent adjustments to the position, which can get costly.
But I agree that a strategy that, as you suggested, goes long vol when it's low and short vol when it's high makes a lot of sense. The problem there of course, as with any "directional" strategy, lies in being able to accurately pinpoint overbought/oversold levels. That can be tough to do as we've seen the last several months when going long vol wouldn't have worked even though on paper it would have been the "right" play.
Thus, my personal preference is to just play the ranges, sell theta and live with the long vega and gamma exposure, understanding full well that vol will go up sooner or later.
Regards,
HD
agree, classical 1:1 it is not vega neutral, but you could ratio it such that both short and long legs would be vega-identical. But as i said, it would not stay there ( and you said that too, i should read more carefully). As for risk, nobody is required to actually sell/buy naked - make each leg a vetical spread. Alternative would be a diagonal spread. But you said it already.